Welcome to 2021, a year that heralds a brave new world for the United Kingdom.
We are now, for better or worse, in a new relationship with the European Union, after five years of debate, division and uncertainty. Although there are a number of Brexit loose ends (see our latest report on Brexit
), the uncertainty associated with leaving the EU seems likely to quite rapidly recede into the background as a pre-occupation.
We have not quite emerged from the COVID-19 winter, but the shape of that exit is now much clearer, with the UK being among the first to embark upon the mammoth task of vaccinating its population against the virus.
And although the 2019 UK General Election now seems a distant memory, the UK Government’s sizeable majority in Parliament gives us the greatest degree of political stability since 2010.
But new issues will emerge for UK economics, politics, society and real estate. We look at these issues in our new 2021 UK Real Estate Market Outlook
The shorter-term issues arising from the pandemic will continue to weigh on real estate throughout 2021, with growth crucially determined by the severity of Government action to prevent the spread of the coronavirus. But each property sector will be affected differently. For most types of real estate, reductions in rents and prices will mostly reflect short-term income loss as the economy has stalled, with an added measure of long-term uncertainty where the pandemic might have introduced new doubts about structural trends. But other sectors have been relatively insulated or even seen growth.
COVID-19 has arguably simply put a rocket booster under real estate trends (such as online retail, or working from home) which were already well advanced in the UK beforehand.
Preparations for Brexit (and indeed reactions to the wider US-China global trade dispute) will also have influenced some trends – for example, in the domestication of goods supply chains.
While the profundity of structural change is often exaggerated, some of these accelerations do seem likely to have been so dramatic as to amount to a permanent reset. In other words: the UK worker, employer, consumer, homeowner or renter will never return to certain pre-pandemic habits. Not in 2021, and not ever.
However, the scale of this change in habits is very difficult to predict, and will probably not turn out in quite the way that some evidence-free futurology is currently forecasting.
Finally, of course, we have a new global economic policy environment arising from Joe Biden’s election as US President, with potential changes in policy areas such as trade, climate change and multilateralism more generally. This change seems likely to bring a new calm to global investment markets – in which, of course, we’ve shown that UK real estate is a particularly active participant
So, 2021 is a new beginning for UK real estate. CBRE’s clients will be breathing a very large collective sigh of relief that major uncertainties which have damaged investment and activity are now behind us. Our new report
tries to foresee what happens next.